April 24, 2007 05:14 ET

Petro-Canada Delivers Strong First Quarter Earnings: Upstream Production Grows


  • Production of more than 400,000 barrels of oil equivalent per day (boe/d) net
  • Construction of the Edmonton refinery conversion project 23% complete at the end of the first quarter of 2007
  • Strong petroleum product demand and refining margins bolster Downstream results

CALGARY, ALBERTA--(CCNMatthews - April 24, 2007) - Petro-Canada announced today first quarter operating earnings from continuing operations adjusted for unusual items of $580 million ($1.17/share), compared with $486 million ($0.95/share) in the first quarter of 2006. First quarter 2007 cash flow from continuing operations was $1,166 million ($2.35/share), compared with $857 million ($1.67/share) in the same quarter of last year. Cash flow is before changes in non-cash working capital.

Net earnings from continuing operations were $590 million ($1.19/share) in the first quarter of 2007, compared with $54 million ($0.11/share) in the same period of 2006. Net earnings include unrealized gains or losses on derivative contracts, and gains or losses on foreign currency translation and disposal of assets.

"We broke through the 400,000 barrel per day mark, consistent with our target of increasing production by 15% in 2007," said Ron Brenneman, president and chief executive officer. "At the same time, we continued to advance our five major projects and saw early exploration success in the North Sea."

First Quarter Results

                                                               Three months
(millions of Canadian dollars, except per share and share    ended March 31,
 amounts)                                                    2007      2006
Consolidated Results
Operating earnings adjusted for unusual items (1)         $   580   $   504
Net earnings                                                  590       206
Cash flow                                                 $ 1,166   $   874
Results from Continuing Operations (2)
Operating earnings from continuing operations adjusted
 for unusual items (1)                                    $   580   $   486
 - $/share                                                   1.17      0.95
Net earnings from continuing operations                       590        54
 - $/share                                                   1.19      0.11
Cash flow from continuing operations                        1,166       857
 - $/share                                                   2.35      1.67
Dividends - $/share                                          0.13      0.10
Share buyback program                                          87       476
 - millions of shares                                         2.0       8.8
Capital expenditures for continuing operations            $   733   $   767
Weighted-average common shares outstanding
 (millions of shares)                                       497.0     512.9

(1) Operating earnings adjusted for unusual items (which represent net
    earnings, excluding gains or losses on foreign currency translation and
    on disposal of assets and the unrealized gains or losses associated with
    the Buzzard derivative contracts) are used by the Company to evaluate
    operating performance.
(2) On January 31, 2006, Petro-Canada closed the sale of its mature Syrian
    producing assets. These assets and associated results are reported as
    discontinued operations and are excluded from continuing

Operating Highlights

First quarter production from continuing operations averaged 405,000 boe/d net to Petro-Canada in 2007, up from 355,000 boe/d net in the same quarter of 2006. Higher volumes reflected the addition of North Sea projects (Buzzard, De Ruyter and L5b-C) and higher East Coast Canada and Oil Sands production. This was partially offset by natural declines in the North American Natural Gas business.

In the Downstream, strong North American petroleum product demand and refining margins, combined with solid execution, delivered excellent first quarter results.

"The Downstream had a very good quarter," said Brenneman. "We've been improving the fundamentals of this business for several years so that, when the business environment is strong, it shows up on our bottom line."

                                                               Three months
                                                             ended March 31,
                                                             2007      2006
Upstream - Consolidated (1)
 Production before royalties
  Crude oil and natural gas liquids (NGL) production net
   (thousands of barrels/day - Mb/d)                        280.4     245.6
  Natural gas production net, excluding injectants
   (millions of cubic feet/day - MMcf/d)                      748       787
  Total production net (thousands of barrels of oil
   equivalent/day - Mboe/d) (2)                               405       377
 Average realized prices
  Crude oil and NGL ($/barrel - $/bbl)                      63.46     64.82
  Natural gas ($/thousand cubic feet - $/Mcf)                7.32      8.68
Upstream - Continuing Operations
 Production from continuing operations before royalties
  Crude oil and NGL production net (Mb/d)                   280.4     225.0
  Natural gas production net, excluding injectants
   (MMcf/d)                                                   748       779
  Total production net (Mboe/d) (2)                           405       355
 Average realized prices from continuing operations
  Crude oil and NGL ($/bbl)                                 63.46     64.18
  Natural gas ($/Mcf)                                        7.32      8.69
  Petroleum product sales (thousands of cubic
   metres/day - m(3)/d)                                      53.0      49.9
  Average refinery utilization(%)                              96        98
  Downstream earnings from operations after-tax
   (cents/litre)                                              3.8       1.6

(1) Includes discontinued operations.
(2) Total production includes natural gas converted at six Mcf of natural
    gas for one bbl of oil.


Operational Updates
  • Buzzard on plan, ramping up to full production by mid-2007
  • Lubricants plant planned catalyst changeout to be completed in the second quarter of 2007
  • Terra Nova 10-day maintenance turnaround scheduled for the second quarter of 2007
  • Syncrude Coker 8-3 maintenance turnaround of about 30 days planned for the second quarter of 2007
  • White Rose planned 14-day maintenance turnaround to be completed in the third quarter of 2007
Major Project Milestones
  • Edmonton refinery conversion project construction on track for startup in the third quarter of 2008
  • Montreal coker investment decision expected in the fourth quarter of 2007
  • Syria gas development front-end engineering and design (FEED) to be completed early in 2008
  • MacKay River expansion regulatory decision anticipated in the third quarter of 2007
  • Fort Hills design basis available in July 2007

Petro-Canada is one of Canada's largest oil and gas companies, operating in both the upstream and downstream sectors of the industry in Canada and internationally. The Company creates value by responsibly developing energy resources and providing world class petroleum products and services. Petro-Canada is proud to be a National Partner to the Vancouver 2010 Olympic and Paralympic Winter Games. Petro-Canada's common shares trade on the Toronto Stock Exchange (TSX) under the symbol PCA and on the New York Stock Exchange (NYSE) under the symbol PCZ.

The full text of Petro-Canada's first quarter release, including Management's Discussion and Analysis (MD&A), can be accessed on Petro-Canada's website at and will be available through SEDAR at

Petro-Canada will hold a conference call to discuss these results with investors on Tuesday, April 24, 2007 at 9:00 a.m. eastern daylight time (EDT). To participate, please call 1-866-898-9626 (toll-free in North America), 800-8989-6323 (toll-free internationally) or 416-340-2216 at 8:55 a.m. Media are invited to listen to the call by dialing 1-866-540-8136 (toll-free in North America) or 416-340-8010 and are invited to ask questions at the end of the call. Those who are unable to listen to the call live may listen to a recording of the call approximately one hour after its completion by dialing 1-800-408-3053 (toll-free in North America) or 416-695-5800 (pass code number 3215986#). A live audio broadcast of the conference call will be available on Petro-Canada's website at on April 24, 2007 at 9:00 a.m. EDT. Approximately one hour after the call, a recording will be available on Petro-Canada's website.


Cash flow, which is expressed as cash flow from operating activities before changes in non-cash working capital, is used by the Company to analyse operating performance, leverage and liquidity. Operating earnings represent net earnings, excluding gains or losses on foreign currency translation and disposal of assets and unrealized gains or losses on the mark-to-market valuation of the derivative contracts associated with the Buzzard acquisition. Operating earnings are used by the Company to evaluate operating performance. Cash flow and operating earnings do not have a standardized meaning prescribed by Canadian generally accepted accounting principles (GAAP) and, therefore, may not be comparable with the calculations of similar measures for other companies. For reconciliation of the operating earnings and cash flow amounts to the associated GAAP measure, refer to the tables on pages 10 and 26, respectively, of the MD&A.


This quarterly report contains forward-looking information. You can usually identify this information by such words as "plan," "anticipate," "forecast," "believe," "target," "intend," "expect," "estimate," "budget" or other similar wording suggesting future outcomes or statements about an outlook. Below are examples of references to forward-looking information:

  • business strategies and goals
  • outlook (including operational updates and strategic milestones)
  • future capital, exploration and other expenditures
  • future resource purchases and sales
  • construction and repair activities
  • refinery turnarounds
  • anticipated refining margins
  • future oil and gas production levels and the sources of their growth
  • project development, and expansion schedules and results
  • future results of exploration activities and dates by which certain areas may be developed or may come on-stream
  • retail throughputs
  • pre-production and operating costs
  • reserves and resources estimates
  • royalties and taxes payable
  • production life-of-field estimates
  • natural gas export capacity
  • future financing and capital activities (including purchases of Petro-Canada common shares under the Company's normal course issuer bid (NCIB) program)
  • contingent liabilities (including potential exposure to losses related to retail licensee agreements)
  • environmental matters
  • future regulatory approvals

Such forward-looking information is subject to known and unknown risks and uncertainties. Other factors may cause actual results, levels of activity and achievements to differ materially from those expressed or implied by such information. Such factors include, but are not limited to,

  • industry capacity
  • imprecise reserves estimates of recoverable quantities of oil, natural gas and liquids from resource plays, and other sources not currently classified as reserves
  • the effects of weather and climate conditions
  • the results of exploration and development drilling, and related activities
  • the ability of suppliers to meet commitments
  • decisions or approvals from administrative tribunals
  • risks attendant with domestic and international oil and gas operations
  • expected rates of return
  • general economic, market and business conditions
  • competitive action by other companies
  • fluctuations in oil and gas prices
  • refining and marketing margins
  • the ability to produce and transport crude oil and natural gas to markets
  • fluctuations in interest rates and foreign currency exchange rates
  • actions by governmental authorities (including changes in taxes, royalty rates and resource-use strategies)
  • changes in environmental and other regulations
  • international political events
  • nature and scope of actions by stakeholders and/or the general public

Many of these and other similar factors are beyond the control of Petro-Canada. Petro-Canada discusses these factors in greater detail in filings with the Canadian provincial securities commissions and the United States (U.S.) Securities and Exchange Commission (SEC).

We caution readers that this list of important factors affecting forward-looking information is not exhaustive. Furthermore, the forward-looking information in this quarterly report is made as of April 24, 2007 and, except as required by applicable law, Petro-Canada does not update it publicly or revise it. This cautionary statement expressly qualifies the forward-looking information in this quarterly report.

Petro-Canada disclosure of reserves

Petro-Canada's qualified reserves evaluators prepare the reserves estimates the Company uses. The Canadian provincial securities commissions do not consider our reserves staff and management as independent of the Company. Petro-Canada has obtained an exemption from certain Canadian reserves disclosure requirements that allows the Company to make disclosure in accordance with SEC standards. This exemption allows comparisons with U.S. and other international issuers.

As a result, Petro-Canada formally discloses its reserves data and other oil and gas data using U.S. requirements and practices, and these may differ from Canadian domestic standards and practices. Note that when we use the term barrel of oil equivalent (boe) in this quarterly report, it may be misleading, particularly if used in isolation. A boe conversion ratio of six Mcf to one bbl is based on an energy equivalency conversion method. This method primarily applies at the burner tip and does not represent a value equivalency at the wellhead.

To disclose reserves in SEC filings, oil and gas companies must prove they are economically and legally producible under existing economic and operating conditions. Proof comes from actual production or conclusive formation tests. The use of terms such as "probable," "possible," "recoverable," or "potential reserves and resources" in this quarterly report does not meet the SEC guidelines for SEC filings.

The table below describes the industry definitions that we currently use:

Definitions Petro-Canada uses            Reference
Proved oil and gas reserves (includes    U.S. SEC reserves definition
both proved developed and                (Accounting Rules Regulation S-X 
proved undeveloped)                      210.4-10, U.S. Financial
                                         Accounting Standards Board
                                         Statement No.-69)
Unproved reserves, probable and          CIM (Petroleum Society) definitions
possible reserves                        (Canadian Oil and Gas
                                         Evaluation Handbook, Vol. 1
                                         Section 5)
Contingent and prospective resources     Society of Petroleum Engineers,
                                         World Petroleum Congress and
                                         American Association of Petroleum
                                         Geologist definitions (approved
                                         February 2000)

There is no certainty that it will be economically viable or technically feasible to produce any portion of the resources. For use in this quarterly report, "total resources" means reserves plus resources.

SEC regulations do not define proved reserves from our oil sands mining operations as an oil and gas activity. These reserves are classified as a mining activity and are estimated in accordance with SEC Industry Guide 7. For internal management purposes, Petro-Canada views these reserves and their development as part of the Company's total exploration and production operations.

Throughout this quarterly report, total Company reserves, total Company production, total Company reserves replacement and total Company reserves life index (RLI) are calculated using the sum of oil and gas activities, and oil sands mining activities. Before royalties, oil sands mining 2006 year-end proved reserves were 345 million barrels (MMbbls) and oil sands mining annual 2006 production was 11 MMbbls.

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